DHR - Embedded Expectations Analysis - 2018 10 01
Danaher Corporation (DHR:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 24.5x Uniform P/E. At these levels, markets are pricing in bullish expectations for the firm. However, management has concerns about their dental business, changing reimbursement policies, and their ability to sustain strong resultsSpecifically, management may lack confidence in their ability to maintain elevated core revenue levels and sustain expanded operating profit margins. Additionally, they may lack confidence in their ability to meet raised net EPS targets, and maintain strong bookings. Furthermore, they may be concerned about changes in reimbursement policies, and about productivity initiatives in their Environmental and Applied Solutions segment. Lastly, they may lack confidence in their dental business as a stand-alone entity, and may be exaggerating their differentiated offerings
Danaher designs, manufactures and markets medical, industrial and commercial products and services. The company's segments include: Life Sciences, which provides research tools to study genes, proteins, metabolites and cells, in order to understand the causes of disease, identify therapies and test drugs and vaccines; Diagnostics, which provides analytical instruments, reagents, consumables, software and services that hospitals, physicians' offices, reference laboratories and other critical care settings use to diagnose disease and make treatment decisions; and Environmental and Applied Solutions, which provides products and services to protect resources and global food and water supplies.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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